ISS Says Deutsche Wohnen Investors Should Approve GSW Takeover

Shareholders of Deutsche Wohnen AG, which include BlackRock Inc. and Norway’s sovereign-wealth fund, were advised to approve the acquisition of GSW Immobilien AG, documents obtained by Bloomberg show.

Institutional Shareholder Services Inc., a proxy advisory firm, advised voting in favor of a capital increase to finance the purchase, which would create the second-largest owner of German homes. The cost savings generated by the transaction would outweigh the risk of making a bid without carrying out due diligence, ISS said in a report sent to investors on Sept. 6.

“Deutsche Wohnen and GSW’s holdings portfolios are highly complementary,” ISS wrote. “The potential benefits of the proposed business combination outweigh the aforementioned concerns.”

The combined company would own about 150,000 apartments valued at 8.5 billion euros, according to the companies’ quarterly reports. Most of the homes would be in Berlin, where price and rent gains have outpaced the rest of the country.

“We are convinced of our offer and are hopeful about the process,” Deutsche Wohnen spokeswoman Manuela Damianakis said by phone.

Both Sides

Deutsche Wohnen, Germany’s second-largest residential company by market value, on Aug. 20 offered to buy its competitor in an all-share transaction that values GSW at about 1.75 billion euros.

Deutsche Wohnen shareholders must approve the issuance of about 129 million shares, which would be used to finance the deal, at a Sept. 30 meeting. At least 75 percent of GSW shareholders must accept the offer for the transaction to proceed.

Deutsche Wohnen owns about 90,000 apartments in large German cities including Berlin and Frankfurt, and GSW owns 60,000 homes in the capital.

BlackRock holds about 6.5 percent of Deutsche Wohnen shares, while Norges Bank owns about 4.5 percent, according to data compiled by Bloomberg.

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